The asymmetric and long-run effect of demand-based CO2 emissions productivity on production-based CO2 emissions in the UK

Abstract

Trade effects on atmospheric air contamination of countries have received increasing global policy focus over the past few decades. The United Kingdom is committed to changing the complexities in international trade, current pathways to economic output pursuit, and carbon dioxide emission toward realizing the goals of the Paris Agreement and Kyoto Protocol. This research is motivated to explore the asymmetric long-run impact of demand-based CO2 emissions productivity on production-based CO2 emissions for the UK economy. Data for this assessment was drawn from 1990 to 2019 and analyzed using Gregory-Hansen cointegration, nonlinear autoregressive distributed lag (NARDL), and frequency domain causality techniques. Gregory-Hansen estimates for cointegration provide integration evidence for all variables. Estimates for NARDL long-run cointegration indicate (i) demand-based CO2 emissions productivity is a credible variable that contributes to reducing production-based CO2 emissions in the UK; (ii) both economic output and globalization contribute in rising production-based CO2 emissions in the UK; and (iii) the frequency domain causality test indicates one direction causality from demand-based CO2 emissions productivity, output, globalization, and consumption of green energy to production-based CO2 emissions in the UK.